China Lowers Rates, Dow Closes Week Slightly Lower

Financials: June Bonds are currently 3 lower at 161’24, 10 Yr. Notes 1.5 lower at 127’24 and 5 Yr. Notes fractionally lower at 119’08.5. Overnight China lowered rates in an effort to address slowing growth and the worry of deflation, joining the what appears to be Global concern about the fear of deflation. Testimony by Fed Chairperson Yellen last week indicated that we will not be raising rates before midyear and that the Fed will be watching numbers as they relate to employment and the target of 2% inflation. I’m still not ready to position these markets and will treat the 10 Year note as a trading affair between 126’16 and 128’16. I will also be watching the Sept.2015/Sept. 2017 Eurodollar spread, as I feel that it will be at least until Sept. 2015 before we see a rate increase. FYI the Sept. Eurodollar now trading at 99.40 has already priced in a 25 basis point rate hike.

Grains: May Corn is currently 1’4 lower at 391’6, May Beans 1’4 higher at 1033’4 and May Wheat 1’6 higher at 514’6. Once again I feel that Corn prices are going to be relatively stable in the near future and recommend a combination of buying strangle and selling straddles. We are going to buy the April Corn 375’0/415’0 strangle and sell the May Corn 390’0 strangle with the intention of collecting 23’0 cents. I still favor the long side of Beans on breaks.

Cattle: Mid to late last week both Live and Feeder Cattle saw significant rallies off of recent lows. If you took last Tuesday’s recommendation to either go long March Feeders or go long Mar. FC 200.00 calls, look for profit taking opportunities. We continue to hold the June Hog 82.00/84.00 call spread with an objective of 210 points. If you are long June Hog futures either take profits or raise your stop to 81.80.

Silver: May Silver is currently 6 cents higher at 16.62 and Apr. Gold 2.00 higher at 1215.00. We remain long Silver.

S&P's: Mar. S&P’s are currently 1.50 lower at 2101.00. Treat as a trading affair between 2086.00 and 2117.00.

Currencies: As of this writing the Mar. Euro is currently 31 higher at 1.1226, the Swiss 20 lower at 1.0459, the Yen 4 lower at 0.8350 and the Pound 50 lower at 1.5388. I remain a seller in the Pound on sharp rallies towards the 1.5600 level for short term (1-3 days) trades.